Business Mathematics Flashcards

What is the present value of $1,210 received 2 years from now at a 10% discount rate?

Answer: $1,000

PV = 1210 / (1.10)² = 1210 / 1.21 = $1,000.

A product costs $80 to produce and is sold for $100. What is the profit margin?

Answer: 20%

Profit margin = (100 − 80) / 100 × 100 = 20/100 × 100 = 20%.

If a stock was bought at $50 and sold at $65, what is the return on investment?

Answer: 30%

ROI = (65 − 50) / 50 × 100 = 15/50 × 100 = 30%.

A company has fixed costs of $50,000, variable cost per unit of $10, and sells at $20. What is the break-even quantity?

Answer: 5,000

Break-even quantity = Fixed Costs / (Selling Price − Variable Cost) = 50,000 / (20 − 10) = 5,000 units.

What is the effective annual rate (EAR) for a 12% nominal rate compounded monthly?

Answer: 12.68%

EAR = (1 + 0.12/12)^12 − 1 = (1.01)^12 − 1 ≈ 12.68%.

A company's current ratio is 2.5 and current liabilities are $40,000. What are the current assets?

Answer: $100,000

Current Assets = Current Ratio × Current Liabilities = 2.5 × 40,000 = $100,000.